Milken Institute report examines ultra-high net-worth philanthropy, offers recommendations to spur giving.

giving of ultra-high-net-worth individualsThe Milken Institute Center for Strategic Philanthropy released a new report analysing the state of ultra-high-net-worth (UHNW) philanthropy, highlighting that much-needed capital remains accessible but unspent.

In 2018, there were 265,490 UNHW individuals in the world (with around 3,000 in Australia). Currently only 36% of those individuals with more than $US30 million in net assets are engaged in philanthropy. Under 10% have made a charitable donation of $US1 million or larger. The top causes for UHNWIs are education, social services, health and the arts.

Further, more than half of high-net-worth individuals (HNWIs, defined as having a net worth of $US5 million or more) do not know whether their philanthropy has an impact, and 78% do not monitor or evaluate the effectiveness of their contributions.

The new report, Stepping off the Sidelines: The Unrealized Potential of Strategic Ultra-High Net-Worth Philanthropy offers recommendations to encourage giving. Although more than $US11 billion in charitable funding has been released to mitigate the many hardships created by the COVID-19 pandemic, there remains an unprecedented amount of capital available for philanthropic purposes. And with as much as $US60 trillion in family wealth expected to transfer across generations over the next two decades (with $US27 trillion projected to go to charitable causes), the amount of capital available for philanthropy is expected to grow.

“We often hear from philanthropists that getting started can be a daunting process,” said Melissa Stevens, Executive Director of the Milken Institute Center for Strategic Philanthropy. “But the issues we are seeing in light of the pandemic and civil unrest over the last few weeks are a call to action. Smart, strategic philanthropy is about taking risks, testing new ideas, focusing on root causes, and most of all, collaborating across sectors.”

Profile of the UHNW philanthropist according to the report

  • The US is home to nearly one-third of the world’s UHNWIs, with Asia close behind. The Middle East and parts of Asia—particularly China, Japan, and Hong Kong—have seen a steep rise in their ultra-wealthy populations.
  • Ultra-high-net-worth individuals are usually male and older. 85% of UNHW wealth is held by individuals ages 50 years and older.
  • The share of women in this population is growing. Approximately 92% of high-net-worth women give to charity. Among UHNW individuals below the age of 50, women account for almost 20%.
  • Next generation philanthropists have a higher tolerance for risk. Individuals between 18-40 years of age are more inclined to fund less established organisations, as well as grassroots advocacy efforts. They consider philanthropy to be a crucial element of their ‘financial morality’, prioritising charitable commitments over their lifetime rather than preserving their assets for future heirs.

Recommendations for UHNW philanthropists

In speaking with high-net-worth donors and other experts, and analysing the giving landscape, the report’s authors identified a number of strategies for getting started and creating sustainable impact.

  • Deploy the full spectrum of assets available. Sharing time, talents, and financial and social capital can be of tremendous benefit to the nonprofit sector.
  • Invest in the nonprofit sector. Building the nonprofit sector’s infrastructure, human resources, and technology capacity will allow organisations to scale effective solutions and further their impact.
  • Collaborate with others. Donors should work with other philanthropists and partner with community representatives and leaders from other sectors.

In investing in the nonprofit sector, the report recommends six strategies for philanthropists:

  1. Fund general operating costs along with specific projects.
  2. Explore a place-based giving strategy and support collective impact initiatives.
  3. Commit to a philanthropic big bet, perhaps via a prize competition.
  4. Play matchmaker to foster mergers between nonprofits to spur scale and reduce fragmentation.
  5. Invest in nonprofit capacity building, including technology and infrastructure upgrades, as well as measurement, evaluation, and learning practices.
  6. Listen to and incorporate feedback of constituents that the philanthropy is intended to benefit; collaborate with them whenever possible.

“There is an unprecedented opportunity to listen, learn and engage, and in doing so, make an impact,” said Stevens.

Download a copy of the full report.

Where are the ultra-high-net-worth individuals?

North America: 91,740 (35%)

Latin America and Caribbean: 8,040 (3%)

Africa: 2,410 (1%)

Europe: 74,380 (28%)

Middle East: 9,710 (4%)

Asia: 75,770 (28%)

Pacific: 3,640 (1%)

Source: World Ultra Wealth Report 2019

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